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Chrysler sale in a skid

The U.S. Supreme Court is engaged in a delicate balancing act this week over the fate of Chrysler Corp. and its investors.

On one hand, there is the legal claim filed by investors led by Indiana pension funds. They argue their legal rights to some of Chrysler’s assets were trampled in the bankruptcy deal and potential sale to Fiat that was put together by the Obama administration. That deal, they contend, illegally allows investors with junior claims on Chrysler to recover more money than the pension funds and other senior investors.

It’s not clear whether their claim is strong enough to win, but liberal Justice Ruth Bader Ginsburg held up the sale to Fiat until the court can review the issue further.

But the longer the court delays that sale, the more likely it won’t take place at all, auto experts say. If the sale isn’t consummated, they say Chrysler will go the way of the dodo bird, taking numerous dealers and suppliers with it, along with billions of dollars of taxpayers’ bailout money.

That’s not a very enticing prospect. But neither is the possibility that hundreds of years of contract law could be ignored if the stakes are high enough and the federal government has a stake in the outcome.

The prospects for Chrysler may be dim if the sale to Fiat is delayed long. But the prospects for investor-based capitalism will be much worse if the high court doesn’t thoroughly review the claims of investors in this case.